How to Establish a Sole Proprietorship in Illinois
To establish a sole proprietorship in Illinois, here's everything you need to know.
Need Professional Help? Talk to a Lawyer.
In Illinois, you can establish a sole proprietorship without filing any legal documents with the Illinois state government. There are four simple steps you should take:
- Choose a business name.
- File an assumed business name certificate with the county clerk.
- Obtain licenses, permits, and zoning clearance.
- Obtain an Employer Identification Number.
To find out how to establish a sole proprietorship in any other state, see Nolo’s 50-State Guide to Establishing a Sole Proprietorship.
1. Choose a Business Name
In Illinois, a sole proprietor may use his or her own given name or may use an assumed business name or trade name. It is also a good idea to choose a name that is not too similar to another registered business because of common and federal law trademark protections. To make sure your business name is available, run a search in the following government databases:
- Illinois Secretary of State
- U.S. Patent & Trademark Office: (Click on the TESS link under Tools.)
- Local county clerk’s office
2. File an Assumed Business Name
If you use a business name that is different from your legal name, Illinois requires you to file a certificate of assumed business name. This is a mandatory requirement in Illinois. To file your assumed business name, you have to fill out the assumed business name certificate available from the county clerk’s office in the county where your business is located. The filing fee is $5. The next step is to publish the assumed business name in a local newspaper for 3 consecutive weeks. The publisher will provide you with a publisher’s certificate that you need to file with the county clerk in order to finalize the process. You can find contact information for each county from the Illinois Department of Health.
3. Obtain Licenses, Permits, and Zoning Clearance
Your business may need to obtain business licenses or professional licenses depending on its business activities. Illinois provides a comprehensive database of every license and permit that may be required by any sole proprietorship. A business can obtain this information by going to the Illinois Business Portal provided by the State of Illinois official website. In addition, local regulations, including licenses, building permits, and zoning clearances, may apply to your business. You will need to check with your city and county governments for more information.
4. Obtain an Employer Identification Number
Sole proprietors who wish to have employees need to obtain an Employer Identification Number, or EIN. This is a nine-digit number issued by the IRS to keep track of businesses. All businesses with employees are required to report wages to the IRS using their EIN. Registering for an EIN can be done online at the IRS website.
Even though sole proprietors without employees are not required to have an EIN, you may want to obtain one anyway. Some banks require one to open a bank account and it can reduce the risk of identity theft.
In Illinois, businesses are required to report taxes and file employee reports. You will need to use your EIN when registering your business through the Illinois Business Registration provided by the Illinois Department of Revenue. If you have employees, you must report and pay employment taxes on a periodic basis. You will be able to report and pay all employment related taxes by registering through the Illinois TaxNet provided by the Illinois Department of Employment Security.
It is important to consider doing the following once you have established your sole proprietorship:
- Open a business bank account. Using your fictitious business name and EIN, you should set up a bank account to keep your business and personal finances separate.
- Obtain general liability insurance. Because sole proprietors are personally liable for all debts and obligations of the business, a business liability insurance policy may be the only form of financial protection against unforeseen events.
- Report and pay taxes. Depending on your specific business activities, you may be required to report such items as sales tax and use tax. You will need to register with the Illinois Department of Revenue Business Registration.